Shock overtook the world with the announcement of downgrading of the US by the rating agency, Standard & Poor's, from the highest rating of AAA to AA , leading to bloodbath in the financial markets around the world. S&P said, it stripped the US off this rating, downgrading it a notch lower to 'AA ', terming the efforts being taken to tackle the country's soaring debt levels as inadequate.
Stung by the first-ever downgrade to its top-notch sovereign credit rating, the US Administration hit back at S&P, saying that the rating agency's flawed analysis has put its own credibility and integrity at risk. The US administration has also got support from legendary investor Warren Buffett, who said that the rating downgrade from 'Triple-A' did not make any sense and he would rather give the US a 'Quadraple-A' rating, if there was one. Reacting to the unprecedented downgrade, the US Treasury Department issued a detailed statement on its website, questioning the credibility and integrity of S&P and terming as misleading and flawed the agency's analysis for the action. S&P, however, defended its action through media interactions and said that the US administration's angry response was on expected lines from any country or company being downgraded.
The US Treasury officials have been saying that S&P had erroneously inflated the US deficit figure by over USD 2 trillion, which they rectified after being pointed out of the error but still decided to go ahead with the downgrade. "S&P acknowledged this error - in private conversations with Treasury and then publicly. In the interim, they chose to issue a downgrade of the US credit rating," Treasury statement said. The head of the White House Council of Economic Advisers, Gene Sperling, also joined in assault on Standard and Poor's, saying that S&P first arrived at a conclusion to downgrade the rating and they decided on the required arguments. "The magnitude of their (S&P's) error combined with their willingness to simply change on the spot their lead rationale in their press release once the error was pointed out was breathtaking. It smacked of an institution starting with a conclusion and shaping any arguments to fit it," he said.
Standard and Poor's has, however, added that there will be no immediate impact of its action on the Asia-Pacific region. But it has, nevertheless, issued a cautionary note. For one, India is the 14th largest creditor to the US, with an exposure of $40 billion in the US securities.
However, two other equally renowned and professional credit rating agencies - Moody's and Fitch - have refused to downgrade the US rating, for now.
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